Over the years, several research has been carried out on family-owned businesses (FOBs) and why many of them do not continue to exist over several generations. This means that about 70% of family owned businesses do not transition from the first to second generation. Some time ago, I heard someone talking about the net worth of his family and it got me thinking about how families can leverage on building sustainable family-owned businesses in order to create increased collective wealth and also make significant impact on the economy as a whole.
FOBs are businesses owned and operated by members of a single family. They could be in any form from small businesses, family-run stores or larger multi-generational companies. Ownership and structure is often based on family relations and can span over several generations if structured well. FOBs have contributed significantly to many economies and has been a force for job creation, economic growth, increase in tax revenue and community amongst others.
Looking at how huge the impact of FOBs is on global economies, there is cause to examine why a significant number of these businesses fail to transition over several generations. The number one reason stated in many researches is the lack of a good succession plan. Family dynamics also comes to play in a lot of cases where issues of mistrust and family rivalry take the forefront. Other factors like poor management and governance, limited access to funding, competition and economic uncertainty also contribute to the failure of FOBs to transition beyond the first generation.
If leveraged well and built intentionally, family businesses can be a source of change in the fortune of several families and a great driver of economic growth. There are structures entrepreneurs who wish to build successful FOBs can put in place in order to make it trans-generational. Let’s continue the discussion in our next article.
In the meantime, how many family-owned businesses are there in Ghana? Do you know any family-owned business that has been in existence between 25 to 50 years and over in Ghana? What challenges would you face if you tried to build a family-owned business today? Please share your thoughts.